How much of my net worth should be in my employer's stock?

Concentration is a default, not a decision

Nobody sits down and decides to put 60% of their net worth into one ticker. It accumulates.

Restricted stock units vest and the shares sit in the brokerage account because selling requires an action and holding does not. Options are exercised and held because exercising and selling felt like giving up the upside. An ESPP buys every six months on autopilot. A grant vests annually for eight years, the stock performs, and the position grows as a share of net worth precisely because it did well.

Then there is the mechanical asymmetry: contributions to the position are automatic, while reductions require a trading window, a preclearance request, a tax consequence, and a conversation with yourself. Concentration is the path of least resistance. It is what happens when nothing happens.

The uncomfortable version of this is that most heavily concentrated executives cannot tell you what target allocation they were aiming at, because there wasn't one.

Three bets, one ticker

This is the part that gets underweighted, and it is the part that matters most.

A retail investor holding 40% of a portfolio in one company has a diversification problem. An executive holding 40% of a portfolio in their employer has something different: their portfolio, their income, and their future compensation are all the same bet.

Consider what a bad outcome at the company actually looks like. The stock falls. Unvested RSUs are now worth a fraction of their grant value. The next grant is sized in dollars but delivered in shares, or the grant program gets restructured, or bonuses are cut. Performance share units miss their targets and pay out at zero. If the situation deteriorates, the job itself is at risk — and the labor market for your specific skill set may be weakest exactly when your industry is under pressure, which is often the same reason the stock is down.

These are not independent events. They are correlated, and they correlate hardest in precisely the scenario you were trying to protect against. A 30% drawdown in a diversified portfolio is a bad year. A 30% drawdown in the employer's stock can be a bad year, a canceled bonus, a smaller grant, and a résumé update simultaneously.

There is also human capital to account for. An executive at 52 with twenty years of industry-specific experience has a large asset that is not on any statement, and it is denominated in the same currency as the stock.

How professionals think about position size

Institutional investors do not think in terms of a correct percentage. They think in terms of what a position can do to the plan.

The framing that travels well: separate the assets funding your required future spending from the assets funding your optional future spending. Required means the mortgage, education, the baseline retirement lifestyle you are not willing to renegotiate. Optional means the second home, the larger gift to the kids, the version of retirement with more travel in it.

Concentration risk in the optional bucket is a question about ambition. Concentration risk in the required bucket is a question about whether the plan works. An executive whose required spending is already fully funded by diversified assets can hold a large concentrated position and be making a defensible bet. An executive whose retirement only works if the stock holds its current level is not holding a position — the position is holding them.

Practitioners commonly use single-position thresholds as a trigger for review rather than as a rule. The number varies by practitioner and by client and there is no consensus figure, which is itself informative. What is more useful than a number is a stress test: model the plan with the position marked down substantially, with the associated bonus and future-grant reductions applied at the same time, and see whether the required spending still funds. That answer is specific to you, and it is the one that actually drives the decision.

Why people do not diversify

Three reasons, and they are worth naming honestly because they are rarely irrational on their face.

Loyalty and identity. Executives who have spent a career building a company find selling its stock genuinely uncomfortable. There is also an optics dimension — insider sales are disclosed, colleagues notice, and no one wants to be the officer who sold. This is real, and it is not solved by being told it is a bias. It is solved by structure that removes the discretionary moment, which is much of the appeal of pre-set plans.

Tax drag. A low-basis position carries an embedded liability. Selling triggers federal long-term capital gains tax, potentially the net investment income tax, and state tax where applicable. Paying that bill to move into a diversified portfolio feels like paying to get a worse return. But the tax is a known, bounded cost. Concentration risk is an unknown, unbounded one, and deferring a certain 20-something percent cost to avoid crystallizing it has led a lot of people to hold through drawdowns much larger than the tax would have been.

"I know this company." This is the most persuasive one and the least reliable. Executives genuinely do have better information about operations than the market does. What they generally do not have is better information about the things that actually move the stock — sector rotation, rate environments, multiple compression, a competitor's product, a regulatory decision. Knowing the company well is not the same as knowing the stock is cheap. And the specific inside knowledge that would be decisive is the kind you are legally barred from trading on.

The mechanics that exist

These are tools, described neutrally. Which apply depends on insider status, plan documents, holding requirements, and tax posture.

Trading windows and preclearance. Section 16 officers and other designated insiders can typically only trade during open windows following earnings, subject to preclearance and blackout periods. This alone shrinks the number of days per year on which anything can happen, which is why unplanned diversification tends not to occur.

Rule 10b5-1 plans. A written plan adopted while not in possession of material nonpublic information, specifying amounts, prices, and dates or a formula, that then executes on its own. Under the SEC's amended rules, directors and officers face a cooling-off period of the later of 90 days after adoption or two business days after disclosure of the relevant quarter's financial results, capped at 120 days; other persons face 30 days. Directors and officers must certify they are unaware of material nonpublic information and are acting in good faith. Overlapping plans are restricted, and single-trade plans are limited to one per 12-month period. The structural appeal is that it converts a recurring decision into a one-time one.

Staged selling. Reducing over multiple tax years to manage bracket exposure and the net investment income tax, often paired with specific-lot identification to sell higher-basis shares first. Slower, and it leaves you exposed for longer, which is the trade.

Charitable strategies. Gifting long-term appreciated shares to a public charity or donor-advised fund generally allows a deduction at fair market value while avoiding recognition of the embedded gain, subject to a 30% of AGI limitation for appreciated property with a five-year carryforward. Note that beginning in 2026, itemizers face a 0.5% of AGI floor on charitable deductions and taxpayers in the top bracket face a cap on the rate at which itemized deductions reduce tax. Charitable remainder trusts are a more involved variant. These matter only if charitable intent already exists — the tax treatment is a reason to give in a particular way, not a reason to give.

Exchange funds. Pooled partnerships into which investors contribute concentrated positions and receive an interest in the diversified pool, structured to avoid immediate gain recognition. They generally require a seven-year holding period, hold roughly 20% of assets in illiquid investments to meet the structural requirements, are restricted to accredited investors and often qualified purchasers, carry over the original cost basis rather than resetting it, and charge fees above index-fund levels. They exist, they are legitimate, and they solve the tax problem by trading it for a liquidity problem.

Hedging and monetization structures. Collars, prepaid variable forwards, and margin borrowing against the position exist as well. They carry constructive-sale rules, disclosure obligations, company policy restrictions that often prohibit them outright for insiders, and counterparty exposure. They are worth knowing about and worth approaching carefully.

The announcement-to-close window

A merger announcement creates a period unlike any other on the concentration timeline.

Once a deal is announced, the stock typically trades at a discount to the offer price. That spread is the market pricing the probability the deal does not close — regulatory challenge, financing failure, a shareholder vote, a walk-away. Holding through the gap means accepting deal risk in exchange for capturing the remaining spread.

Several things compress at once. Trading windows may close and stay closed. Unvested equity acceleration provisions, single- and double-trigger definitions, and treatment of options and performance awards become live questions with real dollars attached, and they are governed by documents most people have never read closely. In a cash deal, the position converts to cash at close, forcing a large realization event in a single tax year regardless of preference. In a stock deal, concentration does not go away — it transfers to the acquirer, and the exposure to the acquirer's business may be one nobody has evaluated.

Meanwhile the employment side is uncertain in exactly the same window. Retention agreements, severance terms, and the question of whether the role survives integration are all in play. Deciding what to do with the position and what to do about the job are the same conversation, and the time to have it is before the announcement, not after — because after the announcement, the ability to act may be gone.

The rest of the balance sheet decides

This is the honest ending. The right level of concentration is not a property of the stock. It is a property of everything else you own.

An executive with a fully funded pension, a paid-off house, a spouse with independent income, and eight years to retirement can carry concentration that would be reckless for someone with a large mortgage, two tuition obligations, illiquid private investments, and a plan that depends on the next three grants vesting at current prices. Same company, same position size, entirely different answers.

The variables that actually move the analysis: what percentage of required lifetime spending is already covered by diversified assets, how much unvested equity is still coming, the cost basis and holding periods across lots, liquidity elsewhere on the balance sheet, spousal income and its correlation to the same industry, time to retirement, and how much leverage sits against everything.

Get those on one page and the concentration question usually answers itself. Skip that step and any percentage is a number someone made up.

What to gather and who to coordinate with

Assemble the full equity picture: grant agreements and vesting schedules for every outstanding award, exercise history with dates and prices, cost basis by lot for all shares held, and the current unvested balance by award type. Add the company's insider trading policy, any stock ownership or holding requirements applying to your role, the trading calendar, and any existing 10b5-1 plan documents. Then the rest of the balance sheet — retirement accounts, taxable investments, real estate, private holdings, debt including any margin or pledged-asset lines — plus the last two years of tax returns and a current-year projection.

Coordination typically involves the company's general counsel or stock plan administrator for preclearance and policy questions, a CPA for multi-year tax modeling and AMT exposure on incentive stock options, an estate attorney where gifting or trust ownership is contemplated, and a financial planner to run the funded-status analysis that determines how much concentration the plan can actually absorb. In an announced transaction, add deal-specific employment counsel.